Retailers know returns are important, but that doesn’t mean they like dealing with them. Ask anyone who works in the industry if they’d prefer to discuss demand generation, customer acquisition, or returns management and the latter topic will be a very distant third.
Unfortunately, retailers (especially those doing a lot of business online) can’t afford to ignore the issue—the majority of shoppers consider a retailer’s return policy before making a purchase.
As a retailer, that means your return policy, as well as your approach to policy implementation, shapes your ability to win new customers and grow sales with existing customers.
In this blog, we’ll explore (and answer) 9 questions you need to consider when thinking about returns in retail.
(And if you’re looking to learn even MORE insights related to retail returns, check out one of our latest ebooks—The Ultimate Guide to Retail Returns Software or How to Optimize Reverse Logistics in Retail.)
Now more than ever, returns are a conduit to the next transaction for both brick-and-mortar and ecommerce shoppers. But because retailers spend most of their time focusing on acquisition and outbound fulfillment, the state of returns across the retail industry is outdated:
This approach helps retailers protect their bottom line in the near-term, but it also leaves shoppers disappointed which isn’t good.
Retailers need to view returns less like an expensive liability and more like a lucrative opportunity.
Long-term?—Returns are a chance to grow lifetime value by building a better customer relationship.
Short-term?—Retailer returns are a way to tee-up the next sale.
Element #1 is the consumer experience—how do brands give shoppers the choice and the flexibility they’re looking for when it comes to returns?
Element #2 is intelligence—how do retailers extract intelligence from data and use it to fuel revenue growth while protecting profitability? An entire infrastructure of intelligence needs to exist to ensure a retailer’s return process accounts for all possibilities (e.g., final sale products, oversized products, dropshipping, etc. etc.) and is as efficient as it can be.
Element #3 is the supply chain—does the customer need to come to the store to return a product? Can they do it from home? Does the shopper have the ability to take a return to a third-party drop-off location (akin to Amazon Lockers)? Will your brand allow for instant refunds? If so, will those refunds be cash or store credit?
Free returns are nice, but consumers value convenience in the return process even more (i.e., controlling how, when, and where they return a purchase).
The gap between what consumers really want (wire-to-wire convenience) and what most retailers offer (free returns for 30 days) is huge. The retailers who can build a bridge to close that experiential gap stand to reap massive rewards.
In a word?—Variety.
Retailers do a fantastic job of incorporating variety into the purchasing experience (in-store, online, BOPIS, curbside pick-up, etc.), but fail in spectacular fashion when it comes to returns.
Going into a brick-and-mortar store or dealing with a customer service agent (via call-centers, email, in-app messaging, etc.) to process a return is unpleasant at best. It is time for retailers to spend as much time thinking about the returns experience as they do the purchasing experience:
What can you add to your returns process to increase convenience for customers without breaking the bank?
Marrying convenience and affordability is complicated. Things like “free returns” and “pre-printed labels” can butcher margins, especially at scale. But, the complexity is solvable. If it wasn’t, brands such as Casper, Everlane, and Warby Parker wouldn’t be around.
For the most progressive retailers, incentivization relies on telling a compelling story that captures the customer’s intent.
If the customer’s intent is to do an exchange, it’s about:
If the customer’s intent is to obtain a refund, it’s about:
(Pro Tip: Protect more of your gross merchandise value by transforming return-refunds into return-exchanges. As many as 1 in 4 customers who intend to seek a refund end up doing an exchange instead when they return to a brick-and-mortar location versus returning via mail.)
When retailers can’t convince shoppers to act as the first-mile, the goal is to get exchangers and returners to bring their purchases back as quickly as possible so the retailer can recapture some value via resale. In a world where retailers are under constant duress due to supply-chain constraints, retailers can tap customers to restock dwindling inventories. The key to doing this effectively lies in reminding the customer (via shortened return windows, discount codes, etc.) to put their returns in the mail ASAP.
From Instacart to Amazon Prime to DoorDash, the modern consumer experience is littered with businesses and brands built to cater to a shopper that’s more convenience-oriented than ever.
And if a consumer is willing to pay a $5 “delivery fee” for the convenience of getting an $8 burrito delivered to their front door, it stands to reason that same consumer is willing to a pay a $5 “pickup fee” for the convenience of returning an $80 pair of headphones from home.
These convenience-oriented shoppers are actually a large subset of the retail consumer audience, and they’re grossly underserved. Future-focused retailers can ingratiate themselves to this audience, strengthen loyalty, and boost lifetime value by offering home pickup returns services (even if they’re fee-based services).
(Pro Tip: Since launching home pickup services with Narvar, participating retailers are seeing inventory returned 25% faster than with other legacy return methods.)
For a retailer with a refined process, the reverse logistics workflow looks something like this…
(Pro Tip: At Narvar, home pickup goes the extra mile by connecting retailers with a curated set of carriers and courier partners. This saves retailers from needing to sign contracts and manage relationships with dozens of couriers and shippers. More importantly, it makes Narvar’s home pickup offering a complete end-to-end solution that guarantees retailers quality, timeliness, and transparency. )
The future of retail returns is rooted in understanding the customer and designing touchpoints that personalize the experience. That means focusing on offerings that emphasize convenience, instant gratification, and personalization.
In the years to come, retailers must extend customer touchpoints and engineer a returns experience that’s better suited to the diverse needs of the modern shopper. Returns must become an expected element of the buyer journey that comes before a repeat purchase—a critical aspect of continuous, omnichannel commerce.
Returns are a natural place for consumers to re-engage with the retailer, the products, the brand culture, the employees, and more. That is why returns (even low price-point returns) are so important to get right. A product that’s only $10 might seem inconsequential, but that’s still $10 that can be put towards a new purchase (and $10 is a heck of a lot lower than the typical customer reacquisition cost).
If there’s one thing to remember it’s this—returns are an opportunity for retailers, not an expense. As fulfillment options play a growing role further and further up the purchase funnel, being able to offer shoppers an array of options for returns in addition to pick-up is critical. Done right, returns can actual pad retailer profits long term through enhanced loyalty and higher lifetime value.